EDF seeks more state funds for Hinkley Point C

14 March 2016

EDF is negotiating with the French government to obtain further financial support for the Hinkley Point C project in the UK, EDF chairman and CEO Jean-Bernard Lévy has said. A review of the project has identified areas where the project could further be de-risked, he said.

In an 11 March letter to EDF staff, Lévy said: "In recent weeks, our group has been the subject of much debate, especially around the renewal of our nuclear fleet and the construction of two EPR reactors in the UK at Hinkley Point C. As you know, the financial context is challenging, and this issue deserves to be clarified."

He said he remains confident that EDF can "manage very large projects that are the pride of communities who value our commitment to public services, and that reflect our industrial excellence and competitiveness." However, he noted that low electricity prices have impacted the group's finances. "To enable us to secure our financial goals and to stem the growth of our debt, we are engaged in an efficiency program," he said. "For the first time in many years, in 2015 we lowered our operating expenses. We will continue on this path, and we will also proceed with the sale of non-strategic assets."

Lévy told EDF staff that the company is in discussions with the French state "to obtain commitments allowing us to secure our financial position". He stressed, "It is clear that I will not engage EDF in [the Hinkley Point C] project before these conditions are met."

The French government - EDF's majority shareholder - has already agreed that its dividend for 2015 will be paid in shares and not cash. This represents additional capital of €1.8 billion ($2.0 billion) for EDF.

Risk review

Lévy said the project's contractual and commercial aspects have been thoroughly examined - including by independent experts - and "allow us to be confident to definitively launch the project".

At the end of last year, Lévy asked former head of France's state nuclear agency CEA Yannick d'Escatha to conduct a project risk review for Hinkley Point C. In a 12 March statement from EDF, d'Escatha said: "We did not find any major risks which had not been identified already and dealt with. But in our view, measures to mitigate these risks could be strengthened to further de-risk the project."

He added, "We judged that these risks had been accurately identified and they can be overcome as long as all the safety measures that we recommend are implemented. So from the perspective of risks and under these conditions - the project can be launched."

In his letter to staff, Lévy said, "I have decided to implement all of these recommendations."

Lévy noted that Hinkley Point C will represent 15% of EDF's investments on average for ten years. He added the project has a good return on investment of about 9% per year for 60 years. "I am sure that this project is a good project for the group and that in the near future all the conditions will come together for it to be definitely launched," he said.

The pouring of first safety-critical concrete at Hinkley Point C is scheduled for 2019, Lévy said.

Learning from experience

The Hinkley Point C project will benefit from the experience of and feedback from the construction of EPR units at Flamanville in France and at Taishan in China, Lévy said. "The project design is stabilized, embeds feedback and is based on the Flamanville design, with only 20% modifications," he said.

"The construction of these EPRs will open further avenues for our French nuclear expertise, an area of excellence. This project will equip us to deal in a more competitive way with the fleet renewal in France when it is needed," said Lévy.